KTM aims to become Europe's No 1 bike maker

by Et

December 6, 2012

Views : 7665

Stefan Pierer, CEO of KTM, shares his vision to dominate the European market and how India plays a vital part in achieving that target

At 56, he still likes riding his Enduro 350 cc on his favourite tarmac, which is off the beaten path, or offroading, as enthusiasts of such cross-country riding call it. He also finds time to attend 15 to 20 such races through the year.These days, however, the sights of the CEO of KTM, Europe's second-largest motorbike maker, are trained firmly on the road - particularly those of emerging markets like India.

With good reason. Pierer's goal is to make KTM Europe's No 1 bike maker, a position currently occupied by BMW. The German automaker is headed for sales of roughly 105,000 units in 2012; KTM is expected to come within striking distance with 100,000 units, up from 83,000 in the previous year.Of those 100,000 units, 40,000 are expected to be on-road bikes.

Half of those on-roaders will be made in the factories of domestic partner Bajaj Auto, which is the secondlargest shareholder in KTM with a 47.27% stake.Pierer along with Rudolf Knuenz holds a controlling stake through a holding company. Four years ago, in the wake of the global credit crisis, Pierer realised that his Indian partner could well be key to KTM's survival as sales dropped by almost 30%.

"We needed a strong back-up. And Rajiv Bajaj, managing director of Bajaj Auto, proved to be a great support. He told us not to worry and that Bajaj will stick by KTM," says Pierer, who was in India a few days ago to attend a quarterly board meeting of the joint venture (one of the four quarterly meetings is held in India).

A decade ago, KTM decided to go beyond its off-roading niche and become a more volumes-driven automaker with on-road bikes. The only way to that was to partner with a maker of bikes with lowerdisplacement engines - KTM bikes typically are in the engine range of 690 cc to 1190 cc. Enter Bajaj Auto in November 2007.

Pierer says, "We have found a good base and a good relationship in Bajaj . We have developed common engine platforms that both brands can use. This has allowed us to enter new market segments of smaller displacement bikes. With Honda coming in strongly in India, Bajaj Auto can use all our high-end technology to take on the Japanese,".

The smaller-displacement engines sit on two platforms - one for bikes in the 125 to 200 cc range; and the other for engines between 270 and 390 cc.The 125 cc and 200 cc models have been launched; by the middle of next year, the others will follow. All these bikes are branded Duke. After these bikes, KTM will launch the Enduro based on components common to the two partners; the Enduro starts at 125 cc and goes up to 690 cc.To be sure, Bajaj is key to KTM's growth plans. In five years, Pierer wants to double volumes to 200,000 units, half of them coming out of the JV with Bajaj. Bajaj explains that the need was to find a partner with the same imagery and the best technology.

"The association with KTM has helped the Pulsar (a bike that stands for power and style) to connect with one of the best technologies in the world. Since the basic platform has a lot of commonalities and when KTM volumes get combined with Pulsar volumes, there are huge cost efficiencies," says the MD. Although Bajaj Auto had discussions with Ducati and Triumph for possible partnerships, it was KTM that had objectives similar to those of Bajaj Auto.

"There was a lot of openness and an eagerness to `watch each other's back' whatever happens. What is good for Bajaj Auto is good for KTM," adds Bajaj. KTM's growth, however, may come at a cost and dilute KTM's equity in the off-road segment - a niche in which it has built a loyal, close-knit community. Says Pradeep Saxena, head of automotive research, TNS India: "The joint development of low-displacement bikes with KTM could dilute the brand in Europe.

However, in India KTM is not all that well-known so the company has the flexibility to grow the way they want to." Pierer, for his part, is confident that the growth "will not hurt our image as a premium bike maker as we will be still sporty with a better design."